China Baowu Steel Group, China’s largest steelmaker by installed capacity, is planning to take control of Shandong Iron & Steel Group (Shangang), another stated-owned steel mill based in East China’s Shandong province, officials from both sides confirmed to Mysteel Global on January 28.
Other than the intention, no more details had been disclosed by either company official, nor had any official announcements been made by either company as of January 28, though market sources appeared little surprised at the latest development, with many expecting an official declaration to be made after Chinese New Year (CNY) holiday over February 11-17.
Shangang, incorporated in 2008 through the integration of Ji’nan Steel and Laiwu Steel, two local state-owned steel mills, is among China’s top ten steel producers. In 2019, it produced 27.6 million tonnes of crude steel, according to statistics of the China Iron & Steel Association.
Baowu itself was incorporated in December 2016 through the merger of then Baosteel Group and Wuhan Iron & Steel Group. In recent years, Baowu’s efforts to expand its presence within China in terms of capacity and geographic reach have quickened. On December 23 2020, Baowu celebrated producing over 100 million tonnes of crude steel in a single year, as Mysteel Global reported.
It acquired Magang (Group) Holding in June 2019 and Taiyuan Iron & Steel Group Co in August 2020 and then assumed actual control of Chongqing Iron & Steel Group one month later. All are state-owned steel companies. All were acquired by Baowu without payment.
Assuming Baowu’s takeover of Shangang proceeds as expected, the deal will be further fulfillment of the aims of Chen Derong, Baowu’s chairman, who last summer had pledged to further efforts in merger and acquisitions to enhance domestic steel-industry consolidation over 2021-2025.
“The 100 million tonnes in a single year is not the destination, but a new starting point for us in the context of the supply-side structural reform in China’s steel industry,” Chen stated at an online event in September last year.
China has been determined to raise steel industry consolidation so that the country’s top ten steelmakers account for 60% of the country’s total production. However, Beijing has extended the deadline for achieving this to 2025 from 2020 initially. The ratio still hovered at around 35%-37% by 2019.
“Ultimately, this (consolidation) is set to change the status quo of China’s steel industry which is scattered and lacks core competitiveness,” a source close to Shangang commented.
Written by Olivia Zhang, zhangwd@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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